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README.txt 5

Why to Start a Startup 6

The Startup Toolkit 10

Learning to Think 28

Hooked on Phonics, Crack, etc… 34

Competition is for Losers 40

Startup Viagra 46

I Love You 50

Case Studies on Getting $hit Done 55

Charity Bake Sale 61

Trust Fall 67

Starship Enterprise 74

It’s More Than Good, It’s Great 79

The Operating Room 83

MGMT (not the band) 88

Use Somebody 94

The Hardware Store 98

Risk Aversion 102

Sell Yourself 107

To Infinity & Beyond 112

Conclusion 117

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Hi there! My name is Rahul Desai and I’m currently studying Operations & Information Management at Georgetown University. I also run a startup called Trendify, which utilizes data analytics to actually predict startup success and develop insights into those outcomes. I’ve become keen on learning as much as possible about startups, mostly through books and online courses. To that end, I’ve been following along with Sam Altman’s course at Stanford “CS183B: How to Start a Startup.” I decided that it would be worthwhile to turn the course notes into an ebook, with the goal of condensing as much information into as little space as possible. I know that we all live busy lives and that it’s hard to sit through long lectures, so I packed this work with the critical insights from Mr. Altman’s course and the guest speakers he hosted. There are also lots of pretty pictures to keep you entertained and motivated. This work is titled “The First 30%” because thirty percent of the learning that founders and companies do at Y Combinator is generalized. It can, theoretically, be applied to all startups. The other seventy percent is intended to be company-specific for YC companies. Since it’s inefficient to impart case-specific knowledge to people in a non-interactive form, I felt that sharing the generalizable thirty percent would be a great way to expose more people to what I thought was an amazing source of intelligence and advice. As startups become more and more popular in our society, it’s crucial to arm ourselves with as much knowledge as we can. I truly hope this proves a useful and enjoyable resource to you. Please feel free to contact me through www.trendify.io. Big thanks to Jake Haberman, Jay Bhandari, and the rest of Team Trendify for their support.

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In our era, startups have achieved a level of respect

previously held by bankers, lawyers, and doctors. News

about “coding wizards” getting amazing job offers and

“college dropouts” pursuing incredible startups seem to

make the headlines every week.

Dustin Moskovitz, cofounder of Facebook, strives to

set the record straight by citing some erroneous reasons for

starting a startup. Firstly, startups are not nearly as

glamorous as they are made out to be in shows like Silicon Valley and movies like The Social Network. Secondly, they

allow founders neither the self-management nor scheduling

flexibility that people so often seek in transitioning to

startups from “conventional jobs.” Finally, the statistical

likelihood of making a huge impact and tons of money are

slim to none.

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Starting a company is not as glamorous as Hollywood paints it to be. In fact, serial entrepreneur turned venture capitalist Mark Suster calls it “entrepreneurshit.” He states that positive outcomes prove exceedingly rare, despite the fact that the mass media only highlights success stories (survivorship bias). Statistics show that 75% or more of all startups fail and that 66% of all venture capital investments are wasted.

There’s clearly an ugly side to entrepreneurship, and a lot of your effort and willpower will just go towards hard work on the company. Startups are stressful: constant engineering problems, customer complaints, and sales obstacles are part of daily life.

All of this stress stems from responsibility; founders

fear failure for themselves and all of those who follow them. In many cases, people depend on you to make a living, or in the case of a young team, they’ve devoted their youth to your company. So you’re now responsible for either their livelihoods or the opportunity cost of their time. You’re on call constantly and you have to stay focused and keep working because so much rides on your success. Additionally, media attention can be stressful: positive media is glamorous but negative, unwanted press is an extreme stressor.

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Another source of stress that people never mention is how committed founders are. Startup employees can quit, just like they would a normal job. Founders could quit, but only at the risk of ruining their reputations and potentially crippling the company. Moreover, founders are not the bosses of their own companies; instead, they have to cater to the media, employees, clients, and partners, upon whom their success ultimately rests. In fact, so much in a startup starts with the founders; if your commitment flags, the whole team’s will too, and that’s unacceptable in a startup. Ultimately, your financial rewards are very strongly correlated with your startup’s impact on the world. Because of this, it makes sense to actually join someone else’s company unless you’re certain you’ll make a huge impact and earn over a billion dollars at your own (which you probably won’t). At a late stage company, you already have an existing user base. Additionally, you’ll also have access to that company’s resources and a team, where you can leverage your ideas into something great. Compare that to some untested, user-less idea floating around in your head.

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You should start a company when you cannot resist the pull of your idea; you’ll need that passion to get around all of the roadblocks. That is to say, you should launch a venture because the world needs it; if your idea is important and will impact the world for the better, only then should you pursue it. The other reason to start up is because the world needs you to do it; do you have area expertise or some other reason that you’re suited to tackle this problem? If not, your time might be better spent elsewhere because you might end up outcompeting a team that actually has the right skills; Outcompeting a better team will create a suboptimal outcome for the world, which you’ll have to bear forever. When you have an idea that refuses to let you go, you have something worth starting up for. You should feel that you don’t own the idea, but that it owns you.

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Startups prove interesting because they are

somewhat of an even playing field. While previously successful founders will have easier access to press and financing, startups thrive with young, inexperienced founders, and old, veteran founders. Factors that are detrimental in other occupations, like being poor and unknown, can in fact be beneficial to startups. Be that as it may, startups are no walk in the park. You shouldn’t start up just for the sake of doing it. You should be striving to solve some great issue that you’re obsessed with.

In the last chapter, you learned why to start a company. But what are you going to do if you’re inclined to go down this road? What are the foundational parts of a startup?

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The four factors pictured overlap to some degree, but they are, without a doubt, the basis of a great startup. Of course, luck is a huge factor, and you can still fail even if you have those four things down. The formula for a startup would be something like: Idea x Product x Team x Execution x Luck = Outcome, where Luck is some random number between 0 and 10,000 and the Outcome is the company’s success or failure.

If you manage the first four things, though, you will have a good chance of achieving at least some amount of success. However, there are some exceptions, a notable one being Palm and the smartphone market: The Palm Pre should have been the smartphone. Palm was positioned to out-compete the bulkier, less intuitive models from Nokia and Blackberry. However, something truly unexpected happened; tech titans Apple and Google saw the market opportunity and decided to release their own smartphones based on iOS and Android, which rapidly ate up market share. This pushed Palm to #3 and ultimately, led to the company’s sale to Hewlett-Packard. This is where the luck factor comes into play, and Palm had some horrendous luck.

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It seems like ideas have become uncool. Some people say you’re supposed to spend minimal time on an idea, without thought to whether this idea is useful or profitable, and instead just jump into starting the startup. And pivots are supposedly great; the more pivots the better.

That thought is partially correct because things evolve in totally unexpected ways and become pivots. Even so, the system is broken. A bad idea is still bad, but the pivot-happy startup ecosystem creates companies that simply don’t generate true value for the world.

Moreover, great execution is at least 10x more important and 100x harder than a good idea, but even great execution on a suboptimal idea will not save a company. In fact, successful pivots are almost always based on ideas that the founders themselves wanted. For example, AirBNB reached greatness in this manner:

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The definition of an “idea” encompasses many things: size and growth of market, company growth and defensibility strategies, and so on. You need to analyze every facet of your idea before starting up. If your company works out, you will be there for a decade or longer, so it’s imperative to determine the long-term value of the business.

Plans are generally worthless because they limit adaptability and things will certainly change. However, the act of planning is valuable, but generally missing in today’s startups. Long-term thinking will give you a huge advantage if you force yourself to cultivate that mindset.

No doubt, your plans will change. Ideas will get bigger and expand to become more ambitious, but the key is having a core that can be developed in interesting ways. A good idea is not just flash or coolness— it is something that is also difficult to replicate. It’s pretty bad if someone else can dream up and implement the exact same great thought.

The idea should come first, then the startup. Founders create companies to solve problems that they feel are truly compelling. Even if you have multiple ideas, work on the one that occupies your mind when you’re trying to procrastinate. In fact, the best companies are mission-oriented, driven by a sense of purpose. It’s hard to get that without a great founding idea. Missions compel people, especially founders, to commit lots of time and energy towards the very risky proposition of launching a venture.

More people external to your company will help you if your idea isn’t derivative. People like supporting truly innovative projects, so it’s easier to found a hard startup, which is incredibly counter-intuitive. Copycat ideas don’t excite people and don’t compel teams to work hard— missions do. Awesome ideas are very different in one big way or envision something totally new, but they are not clones.

Lots of great ideas sound terrible: before they launched, who would’ve wanted a search engine without a web portal (Google), a social network limited to college kids

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(Facebook), or a way to crash on random people’s couches (AirBNB)? All of those ideas sounded horrible at first, but turned into runaway successes. Ideas that sound great are going to attract wannabe founders like moths to a flame. You, on the other hand, want to create a monopoly. You should be able to say: “Today, this small subset of people is going to use my product/service, but eventually, I will get the entire group, and in the future, everyone will use this.”

Have conviction in your own beliefs and a willingness to ignore naysayers, but note that there is a fine line between right and crazy, so be careful as to which side you occupy. This is also why it’s ok to talk about your idea; truly good ideas don’t sound like they are worth stealing. You want to tell people that you know your idea sounds terrible but go on to specifically outline its awesome qualities.

Ideation includes thinking about the growth of the market. Will your market be big in 10 years? Will it still even exist? Investors don’t seem to care about market growth over company growth, but you should. It’s perfectly fine if you’re going after a small, rapidly growing market; in fact, customers in these markets are generally desperate and will put up with imperfect, iterative products. You want a fast market, a tailwind in your sails. See the next page for a tip on fast markets; software is changing everything.

Why now? Why is this the perfect time for this idea and this company? Why couldn’t this work two years in the past or future? If you can’t answer those questions, you should be at least a little suspicious about it. Successful startups have both great ideas and great answers.

Scratch your own itch. You'll understand your own problem much better than having to interview customers to build product. If you’re building something someone else needs, realize your disadvantage and get really close to the customers, and therefore to the problem. Try to physically go work with them, if possible, and if not, talk to them almost to the point of being annoying.

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Another counterintuitive thing about ideas is that they’re almost always easy to explain and understand. If it takes more than a sentence, it’s too complicated. Your great idea should be a clear vision articulated in a small number of words.

Finally, your idea should be people-centric. What do customers want? What does the market want? If you can answer those questions truthfully and accurately, you have an advantage when it comes time to build product.

A product is something a company builds to solve a problem, including customer support, product explanations, and anything else involved in the way your customer interacts with the product, and more.

Turning a great idea into a great product is hard, but crucial and, fortunately, fun. Great products are always new, so it can be hard to give advice on what to build, but you can always ask how to build it. Knowing what to do and how to do it are the keys to success in achieving your goals.

Most startups’ early days revolve around building product and talking to customers, all the time. You should reevaluate if you’re allocating your time differently. Most problems that startups face are far easier when you have an awesome product that you can point to and say “we did that.” Ignore financing, recruiting, partnerships, PR until you have an amazing product that will, by its nature, attract all of those things for you.

Make something people cannot live without, and you have a strong foundation for future success. If you can choose between making a lot of people like a product and making a small number love it, always go for the option that engenders love. It’s easier to expand from a lovable product than a likable product.

Of course, it would be best to make a product that tons of people love, but bigger companies will jump on those opportunities, generally. Lovable products practically grow

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themselves through word of mouth. If you are waiting for a partnership and justifying your lack of growth, something is wrong. Worry about making your product amazing, above all else.

Remember that straightforwardness is good. Great products are simple to use and even simpler to get started using. When in doubt, think about the things you use on a daily basis. Most importantly, simplicity forces you to do one thing really well. For example, there’s a reason that everyone flocked to iPhones despite the fact that other smartphones were already on the market. Steve Jobs’ emphasis on user experience and design resulted in a product so simple that we didn’t realize we wanted it. The original iPhone was the epitome of what smartphones were supposed to be, powerful but simple and intuitive; it succeeded in defining the rules of the game in mobile, all due to the fact that it was simpler than the competition and great at fulfilling its functionality.

Great founders are fanatical about even the smallest product details. They make sure the copy looks perfect, and

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that customer service is carried out wonderfully. Among Y Combinator companies, the founders that connected Pagerduty to their customer service tickets in order to respond to emails late at night tended to be successful. Founders should feel physical pain when the product sucks; don’t ship crap to your clients, and if you do, fix it quick.

Go recruit customers in person, without the help of online advertising. Find people that will give you feedback constantly, and who will eventually fall in love with your product. Listen to these people, get close to them, and they will tell you how to make a product that they’ll pay for. You need to ensure that the company can turn user feedback into product decisions constantly. The voice of the customer is the only one that matters.

For example, when Pinterest was young, the founder would go to local Apple stores and load Pinterest as the default webpage on all of the computers. This would expose all of the store’s customers to the Pinterest brand, and hopefully pique their interest.

Good founders do work themselves; they do sales and customer support. They use metrics to stay honest, but the company will build whatever the CEO decides to measure. If you’re building an Internet service, ignore total registrations and look at growth, active users, activity levels, revenue and other factors that actually have a bearing on your success. If things aren’t looking so hot, you need to be brutally honest; these are startup growing pains.

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First, let’s look at cofounders. Cofounders and their relationship are among the most important pieces of a startup. In the history of YC, the number one cause of early startup death is cofounder blowups. For some reason, though, many wannabe founders treat choosing cofounders as less important than regular hiring. However, choosing a cofounder is like getting married; after all, you’ll be together for many years.

Student founders are notoriously bad at this because they just pick random people: “Hey I’m looking for a cofounder and I don’t know you, but let’s start a company.” Even doing a regular hire like this would seem insane. Choosing a random person or an acquaintance as your cofounder will usually end in disaster. A great way to meet potential, good-quality cofounders is by looking at your social circles in college or by working at an interesting company. For example, Facebook and Google are almost as cofounder rich as Stanford.

It’s better to have no cofounder than a bad one, but flying solo is still pretty bad. Not having a cofounder indicates that you couldn’t get someone else to believe in your idea, and that seems like a bad sign for the future.

So when you have potential cofounders in mind, how do you select the right people? You want someone who is “relentlessly resourceful.” You need people who are tough, imperturbable, and constantly adapting to situations. They prove decisive, quick, creative, and ready for anything. In today’s zeitgeist, the best example would be Katniss Everdeen from The Hunger Games.

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Obviously, you want a smart cofounder, but you definitely need to prioritize mental toughness and a sense of calm as well. Furthermore, you need to find yourself a technical cofounder if you don’t possess area knowledge; hiring tech people or outsourcing the labor just does not work well. What happens when the new hires don’t actually know what they’re doing, or when the firm you’re outsourcing to goes bankrupt?

Finally, you want to hit the sweet spot of cofounding: how many is the right number? One isn’t great, but five is bad because that many voices drown each other out. Shoot for a total of two or three founders, maybe four in rare cases.

The cofounder equity split should be near equal, and should be cemented early on. You need to make sure you have a vesting structure in place to prevent people from taking shares and running away with them. That will hurt you when you go to get investment.

Now it’s time to consider employees. When you want to hire, try not to. You should only hire when you physically cannot shoulder the burden anymore. People these days use employee count as a measure of a company’s coolness. If you don’t have many people working for you, you’re seen as a joke; if you have a lot, people get really impressed. But over-hiring is a bad thing because it creates a high burn rate (lots of money lost monthly), organizational complexity, and slow, bureaucratic decision-making. Startups are meant to be the antithesis of that; indeed, speed is our only weapon in most cases.

Bad hires kill companies, so take it slow and be certain about your talent. AirBNB spent five months interviewing their first hire and only hired two people in their whole first year. Their CEO used to ask if people would take the job if the applicant only had one year left to live. The intensity of that question shows you how much these hires really matter and how they define your company. You need people to express the same obsessive belief in your company that you do; although that might seem like an insane thing to ask of

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people, it creates culture. When AirBNB faced crises, all employees would live at the office and work until the crisis ended. The first forty employees there all say they felt like they helped found the company.

Even if you hire slowly, you must fight to recruit the best people. When you’re in hiring mode, you prioritize finding amazing talent. Founders underestimate how hard it is to attract awesome people. Great hires have lots of other options so it can take a long time to convince people that your mission is worthwhile. How much time do you spend on hiring, then? The right answers are none of your time or a quarter of it — either you’re not hiring, or it’s the biggest thing on your plate.

The best people know that they should join a rocketship, so you need product to prove that you are. Even if you just want to work for a startup, you should try to choose a rocket. Pick a company that works but one that not everyone realizes will be huge. If you’re looking closely enough, you’ll be able to see this. Good hires know this truth and they will wait to observe the company trajectory.

Mediocre hires can kill companies. Never compromise on this; if one of your first five to ten hires is subpar, it might irreparably damage your organization. Whenever you hire, you need to ask yourself: Am I willing to bet the future of my company on this person? You should always be able to answer that, and if you can, you won’t mess up your hires. Where can you find talent? The best source of hires is people you already know or people that your hires already know. Personal referrals are the trick to hiring; at Facebook and Google, human resources will ask you about every smart person you have ever met in order to recruit them. Finally, look outside of Silicon Valley for recruits; the SV region and a lot of central California is brutally competitive, but there’s a whole world of talent out there.

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For most early hires, experience does not matter as much as belief and aptitude. When you are growing and you face lots of challenges, it’s better to recruit people with lots of experience (e.g. Facebook bringing on Sheryl Sandberg as COO).

1. Is this person smart? 2. Do they get shit done? 3. Do I want to spend tons of time with them/ would I

hang out with them? 4. Would I mind working for them if the roles were

reversed? If you can say yes to all of those things, you can be

fairly certain that you have a good hire on your hands. Ideally you’ve worked together in the past, but after you interview, be sure to bring them on for a trial project. You’ll both learn a lot and be able to make a better evaluation and hiring decision. Ask about their previous projects and call their references; really dig deep and ask tough, detailed questions: Is this person in the top five percent of people you’ve ever worked with? Would you hire them again? What did they specifically do? Can this person communicate clearly?

Good communication skills correlate with good hires. If someone is hard to talk to or cannot communicate well, that proves a real problem. Furthermore, these people need to have an appetite for risk. If they are considering between joining Goldman Sachs or your company, it’s probably not going to work out for you.

You need people who are maniacally determined. Paul Graham says that you should be able to describe any employee as some animal at their task. You need unstoppable people who get shit done. Your people should seem like the best in the world at what they do.

Equity is a touchy subject, but your first ten employees should get ten percent of the company. When

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you’re vesting your equity (and you should be), these people will have to earn it over years, and will be contributing much more value than they’re getting out. They add continuous value; investors, on the other hand, generally don’t. They’ll cut you a check once, and advise you occasionally; after all, they have other portfolio companies.

After you’ve gotten employees, you need to retain them. Employees must feel happy and valued, which is why equity is so important. You can never let resentment set in among your employees. Praise your people. Let them have credit for the good stuff, and allow yourself to absorb blame for the bad. Furthermore, do not micromanage. People like having autonomy, mastery, and purpose, especially if they’re Theory Y employees, which most startup people are.

How do you fire people when it is not working out? Founders often wait too long, hoping that the problem will resolve. But you have to fire fast when you realize there’s an issue; it’s painful and tough, but just remember that you’re doing a hard thing to save your brainchild, your baby. Of course you need to get rid of bad talent, but you need excise those who create office politics or a persistently negative mood as well. Those are poison to young companies.

How, then, do you balance making employees feel secure with your need to fire fast when things go south? The decision to fire is not based upon one or two mistakes; everyone will make a few mistakes or even more. Be a good team leader, and be forgiving. The need to fire comes up when someone is messing up constantly and then, it should be obvious to everyone. If you look at someone’s choices and you would do the opposite every time, you will almost automatically know you need to intervene.

You should avoid having a remote team in the early days, because communication and speed outweigh everything. Video conferences and emails don’t work as well as meeting in person. Of course there are outliers; for example, 37Signals (now Basecamp) has 28 of its 39 employees working remotely:

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Execution is probably not the most fun part of running a company, but is definitely the most critical. The best way to have a company that executes well is to execute well yourself. Founders create the culture; they serve as the role models for all other employees. Your team must see you as an endlessly driven execution robot. Ideas are plentiful and worthless, execution is rare and valuable.

What does a good CEO do? The first four roles seem obvious: set the vision, raise money, evangelize the mission to talent, partners, press, etc, and finally, hire and manage the team. But the most important and often forgotten part of being a CEO is setting the execution bar; no one can do this except the CEO.

Can you figure out what to do? Can you do it? Given that you know what you’re doing, you need focus and intensity to do it. A thousand things will compete for your attention daily and you need to pick a handful to work on. Those two or three things will be the most important things, everything else will either wait, or come at you in crisis format (think dodgeball in elementary school gym class).

How do you determine what merits your focus? Set goals for each week, and then everyone can execute based on those. Founder set the focus. The best founders repeat

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goals over and over; they obsess over them and force everyone else to do so as well. Communication is key here; even a small communication breakdown could ruin everything. You must focus on growth and momentum; startups live on these.

Additionally, you need to be incredibly intense. You can have a startup and one other thing in your life, but not much else. There is no work life balance, in reality. You need to outwork your competitors.

It’s easy to move fast and break things, and it’s easy to be obsessed with quality, but it’s insanely hard to do both. From Day One, you need to create a culture that places huge value on both. Create bias towards action. Do small things really well and really quickly.

The best founders are fast. They pick the right size projects, and move really quickly: they respond to email instantly, they make decisions at light-speed, and they generally do whatever it takes.

The best founders also show up. Altman explains that he got on a plane to close a deal that a competitor was about to steal from under him. His team sat in their target client’s office all day until they finally agreed to talk; the plane trip ended in a contract for Altman’s company. Get on the plane in marginal situations.

A winning team keeps winning. A team that hasn’t won lately loses steam and keeps losing. If you’re in software, keep growing. If you are in hardware, ship product when you say you will. When in doubt, sales fix everything. If you can rack up small wins and revenue, other problems will disappear.

Facebook created a “growth group” in 2008 to work on small project to help the company grow faster. This group changed the whole dynamic and got the company back to winning. It’s essential to establish an operating rhythm early on; ship product and launch features regularly. Review metrics constantly. Don’t worry about competition unless they’re beating you with real, shipped product.

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Startups are very counterintuitive; this may be simply because accurate knowledge about them has not permeated our culture yet, but in any case, be cautious about trusting your intuition in a startup. Starting up is like skiing in that sense. When you first learn to ski and want to slow down, you instinctually lean back, but that sends you hurtling down the mountain even faster. To achieve control, you need to suppress your initial impulse. There are six major counterintuitive truths people must know about startups:

Founders at YC persistently ignore their advisors/

partners’ advice because that advice is generally counterintuitive, so it seems flat out wrong. You do not need anyone to give you advice that doesn’t surprise or shock you; you could come up with those answers on your own. That’s why there are many ski instructors, but not many “running instructors”; in fact, it’s odd to even put those two words together, because running is so innate.

Be that as it may, you can rely on your feelings about people. You’ve been interacting with people forever, and business interactions are similar to other human interactions. It is, in dealing with people, a mistake to not trust intuitions.

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A French class can teach you to speak French but no

amount of startup education can actually teach you how to start up. Facebook didn’t succeed because Mark Zuckerberg was a startup expert. He was a total novice at startups; Facebook was first a Florida LLC. Most people know that’s a terrible idea. Zuckerberg did well because he knew his users.

One of the troublesome things about startups in modern life is that people see startups in the media and then go through the motions of running a startup. People come up with a plausible idea, raise money, get an office, recruit all of their friends and then realize they’re out of luck when they neglected the one thing a startup is supposed to do: make things that people want.

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Why do people “play house” so much with startups? It

turns out this is what we are trained to do, all along. From getting into college and even in college, “education” is as artificial as running laps; people are trained, consciously or unconsciously, to exploit the difference between going to school and actually learning. We were trained to succeed at games like this: fake it ‘til you make it. But there are no tricks for startups. Any time you hear about tricks, think “bullshit.” The only real “growth hack” is making something people love.

In a startup, there is no boss to trick. You, as founder, are the authority, and your success depends on providing tangible products to users. All users care about is whether the product does what they want it to, just like a shark only cares about whether there is meat or no meat; you can’t wave a red flag and fool a shark into thinking it’s meat. You can fake it in front of investors, but that just delays the inevitable. There is no bag of tricks in Startupland.

If you found a startup, it will own you for several years

at least, but more likely a decade or even the rest of your working life. There is a real opportunity cost to startups. Larry Page might seem like he has an enviable life, but he started running when he started Google and hasn’t stopped to catch his breath since. Every day shit happens at Google that only he as the emperor can deal with. If he goes on vacation, a backlog of stuff accumulates, and he has to bear this because he is the company’s role model and cannot show fear or weakness, and because billionaires get less than zero sympathy when they complain.

Starting up is like having children; your life changes irreversibly. Many things are easier to do before you have

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kids, and so many people delay that choice for a while. Then why is the belief that college kids should be starting up left and right so prevalent? If you start as a college kid, you will either be a real student and not have a startup or you will run a real startup and not be a student. Age twenty is probably not the optimal time to start a company.

A successful founder will never get to bum around some exotic country. When Zuckerberg goes somewhere, it’s as a de-facto state visit. He will never get to backpack across Europe. The company runs you as much as you run it. Usually startups take off because the founders make them take off; it can be stupid to give up your life to do that at twenty.

In starting a startup, you are trying to estimate not

only what you are, but also what you could become. Who can, with accuracy, do that? It’s easy to see how smart people are, but it’s hard to see how tough and ambitious someone

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will become. The only way to discover what your chances are of being the person who wins in Startupland is to actually do it. (Team Trendify is actually trying to fix this and make startup success more objective).

When you make a conscious effort to come up with

startup ideas, you will think of ideas that are both bad and plausible-sounding. This is really scary because it will force you into a place where you and everyone else will be fooled by them before you realize they’re no good. The best way to come up with startup ideas is to take a step back.

Instead of making an effort, train your brain to dream up ideas unconsciously. You won’t even realize that you have startup ideas at that point, but that’s how Google, Yahoo, and Apple were created. They were just projects, and that’s because they were such outliers that the conscious mind would reject them as ideas for companies. You will realize it when a side project is supposed to become a company.

To refine your ideation process, you need to learn a lot about a lot of things that matter. Work on problems that genuinely interest you. Finally, work with people you like and respect.

What counts as an interesting problem? If you’re looking at tech as some kind of virus that’s spreading throughout everything, you want to get yourself to whatever will be infected next. Live in the future and ideas that seem prescient to others will seem obvious to you; you’ll know that something ought to be done about those issues.

You should be pursuing your intellectual curiosity within some domain when founding a startup. The startup, in fact, should act as a vehicle for the ulterior motive of expanding your expertise. Just learn.

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What most people do incorrectly when they want to build a startup is thinking “I have this really great idea, so I am not going to tell anyone about it. I’m going to build and then tell a few people and launch it on TechCrunch. That’ll get me lots of users.” Because you failed to get feedback early on, you might end up with a lot of hits on your site, which rarely turn into converted customers. You could go buy some users, but that’s a vicious cycle that just causes you to hemorrhage money. The only thing you should do from the first paragraph is launch on TechCrunch or somewhere like that.

You need to really figure out how your idea is solving a problem. You should describe the problem in one sentence, optimally. How does it relate to you? Are you really passionate about it? Do other people have this problem? You need to go out and verify by actually talking to people. For example, Adora Cheung of cleaning service Homejoy initially started a company called Pathjoy. This

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company strove to make people happy by creating a platform for life coaches and therapists; however, the founders didn’t even want to use their own service. Don’t do something you’re not passionate about. When you have something you care about, immerse yourself in that industry. You should take time to understand the little bits and pieces of the industry because the devil is in the details. That is when you see inefficiencies that you can exploit by cutting costs, for example. You should be obsessed with the space. Learn about all of the competitors and similar companies; read their financials and S-1s, read every Google search result, sit on their earnings calls. This is not to say become overly concerned with what your competitors are doing. Rather, you need to develop deep expertise in your field. Second, identify customer segments. Ultimately, you want a product that everyone is using. Realistically, at the start, you want to find a specific part of the customer base to tailor to. Finally, before you do anything, determine what the user experience will be like. How do you communicate with your customers? How do they learn about you? You need to visualize what the perfect user experience is. Then put it on paper, and then in code. Now that you’ve got all of that down, you can focus on building product. People love to talk about the “minimum viable product” but you should remember that user experience is part of that. Make sure your users are happy and that you’re solving their immediate needs. Position your product in one sentence: “this does X, Y, and Z.” You need a one-liner because people get bored quickly. You need to describe the functional benefits really rapidly to keep potential users interested. At the end of the day, what are people getting out of it? You have an MVP done, but when you want to launch it and get users, what do you do? You should be using it. Your family and friends should be using it. Go post on Hacker

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News and Product Hunt as well as on local community mailing lists. Go to where your target audience is, and do whatever it takes to convince them. Your conversion rate will be low but that is how you start. When you have users, make sure they can contact you. You need inbound feedback, whether by phone or email. If you send surveys, you’ll never get anything but extreme opinions; go physically meet with users to get the most honest feedback. Make it a comfortable conversation and take them out for coffee or drinks. Track customer retention as well as reviews and ratings. Then ask how likely they are to recommend you to a friend. Use that to figure out net promoter score; having people that will talk about you is good for business. Reviews and retention should be going up over time; if something else is happening, you need to go figure out what the issue is and what you need to fix or change.

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You can get the best feedback if you make people pay for your product. If you are going to build a product that you’re eventually going to need people to pay for, get to that point fast. Then you can optimize how to get more paying users in the door. When you have ten users, build for them, not for the 10,000 you might eventually have. Focus on the people you have on board so that you don’t alienate them. Build things yourself. If you try to automate too fast, you move into the issue of not being able to move quickly and iteratively. When you are starting out, perfection is irrelevant. Worry about the generic case of the core user, and focus on growing well. If you just take user suggestions at face value, your product will be Frankenstein, which means that you take tons of user feedback and squish it all together. Users might not always give the best solutions. Figure out what the core problem is, and then figure out how to fix it before you throw on a bunch of suggested features that just obscure it. Unless you’re building something that costs millions of dollars to build, don’t wait to launch. At this point, you should be ready. Find one growth channel and execute on it until it caps out; if it doesn’t work, try something else. Make sure you come back later and give a failed channel another try. There are three types of growth: sticky, viral, and paid. Sticky is when existing users come back and pay you more or use you more. Viral growth is when people talk about you and convince other people to use your product. The third is paid growth; you can buy growth if you have enough cash. In any case, growth has to be sustainable. You need to deliver a great, addictive experience. Then people will want to keep using you.

When you start, 100% of your user base will use you. The next month, say 50% come back. How many come back in the third month? Eventually this curve will flatten out and the people left over will be your core consumers, who will stick with you. Consider the following graph.

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One year later, you want more than 50% of people the second month. A bad retention curve has no one coming back; that’s a crappy business. Viral growth hinges on an intrinsically amazing user experience. You need to make people want to tell everyone they know about you. Then you need an awesome referral system that lets people talk about you easily.

Where can you tell users that they can and should tell others about your product? Do you tell them after they sign up? Do you tell them after you see that they’re highly engaged? No matter what, you need to tell them at a point in time when they really love what you do.

How do you incentivize people to share? $10 for $10 works— you get $10 for inviting your friend and that person will get $10 too! But you can try numerous other methods as well. Then you need to optimize how the friend will convert from a visitor into a customer.

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Finally, you can pay for growth. You’re going to risk putting money out there to get a return (i.e. users). Figure out your customer acquisition costs. Are they lower than the customer’s lifetime value (how much you’ll make off of this user)? If that’s the case, you’re earning a profit. You should segment this out; for example the customer lifetime value (how much each user is worth in total, aka CLV) in Memphis, Tennessee will probably be higher for a country music marketplace than in Greece. Finally, don’t spend beyond your means. Remember that payback time is very important. People should be paying you every three months, maybe every twelve if you love risk. When you start, focus on getting the first user, then two more, then four more, and so on. After you hit 100 users, you can start focusing on real, high-velocity growth. If nothing is working to grow your company, perhaps it’s time to pivot. If no one is staying, or the economics don’t make sense, try another idea.

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If you’re starting a company, you should always aim to establish a monopoly and avoid competition. Businesses are valuable when two conditions are met: a) that you create “X” value for the world and b) that you capture “Y” percentage of “X” value. X can be huge and Y can be small, or X can be smallish and Y can be big, but the company would be valuable in either case.

The airline industry is a lot bigger than Google in terms of domestic revenue: $195 billion vs $50 billion respectively. However, aviation is highly competitive, but Google is a monopoly, so lots of airlines have to split that 195B whereas Google can take home a tidy 50B. People seem to talk about perfect competition a lot, however, and seem to shun monopoly. This might stem from the fact that many of us learn about perfect competition early on in Econ 101, it’s easy to model, and it’s efficient, especially when things are static. Our society tells us that competition is good; consider anti-trust laws that the government enforces. In reality, competition does not allow people to profit much and forces businesses to fight for their lives daily.

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Monopolies are often more stable, more profitable, and symptomatic of true, valuable acts of creation. Peter Thiel states that these are really the only two types of businesses in the world. Monopolies, of course, like to pretend that they’re not. They don’t want government regulation so they’ll say that they’re locked in intense competition. On the other hand, competitive businesses vying for supremacy will always argue that they’re somehow differentiated. The basic lie you tell in competition is that you’re in a small market; in monopoly, you say the market is much bigger than it appears. Capital accumulation and competition are antonyms; in perfect competition, all of the capital gets competed away. So if you’re opening a restaurant, no one will invest because restaurants are extremely competitive and will just lose money. You’d be forced to say something like “we’re the only Finnish restaurant in Palo Alto.” So now you’re fictitiously limiting your market. Are the intersections you’re positing real? Do they make sense and have value?

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In startups, people think it is ok to just combine strings of buzzwords and a narrative. If you find yourself saying that your company or product is the “something” of “somewhere,” it’s probably going to end up as the nothing of nowhere. The Harvard of Kansas isn’t the Harvard. If you’re Google, on the other hand, and you own 66% of the search market, you’re never going to tell people you’re a search company. If Google says it does advertising, it’s only taking home about 3.5% of a ~500B market globally. But maybe Google says it’s a technology company, operating in a trillion dollar market. They’ll say they’re competing with car companies with self-driving automobiles, and with Apple on iPhones and TVs, and they compete with Facebook and Amazon and Microsoft, too. They’ll say there is no way they’re a monopoly, and they should certainly not be regulated. So you can see the incentives to distort the true nature of companies. However, companies in tech are generally so often monopolies that you have Google, Amazon, etc. all making so much cash they don’t know what to do with it. So how do you replicate their success? First, you want to go after a small market; take that over and expand in concentric circles. Going after a massive market can be a mistake because it shows that you haven’t defined your market or your categories correctly when determining your intersection. Amazon started as an online bookstore and moved into other forms of ecommerce. eBay started with auctions for Pez dispensers and Beanie Babies and then moved into all sorts of auctions. PayPal began with power sellers on eBay and got to 30% penetration. Small markets are often underrated; these markets seem so small that they’re worthless, which is definitely not the case. Be a one of a kind player in a small ecosystem, for example, like Facebook opening up only to Harvard kids at first. Furthermore, you can’t copy others or the past. The next Gates, or Jobs, or Zuckerberg won’t be doing things those people did.

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To establish and maintain a monopoly, you should build something an order of magnitude better than the next best thing. Amazon had ten times as many books. PayPal could move money from buyer to seller ten times as fast. A powerful improvement on a key value dimension is critical if you’re not building something brand new. Conventional wisdom states that you should be the first mover to tackle something. Perhaps it’s better to be the last mover: Microsoft had the last operating system for years and Google is the last search engine. They outlasted the early movers and learned from those early failures. In fact, analyzing discounted cash flows will tell you that 75 to 85% of all value will come from cash flows far in the future, so you should value durability and longevity as much as growth. A monopoly will have network effects, economies of scale, and proprietary technology. Networks will actually grow as time passes allowing the network effect to become more robust, and therefore allowing the monopoly to become bigger and stronger over time. Economies of scale are practically built into software because the marginal cost of another unit of software that you’re selling is either zero or very close to it. Proprietary tech is tricky; you need to get people’s attention by being better than the next best thing initially, but you also can’t let yourself be superseded. Why will you be the last breakthrough, at least for a long time? There are entire sectors where talented innovators actually end up capturing no value. The smartest physicist of the 1900s, who came up with relativity, didn’t even get to be a millionaire. Railroads were valuable but went bankrupt due to competition. The Wright brothers flew the first plane but didn’t really make any money. People really only made lots of money when creating things in two broad scenarios. The first is a vertically integrated monopoly, like Ford or Standard Oil at the start of the twentieth century. These require a lot of complicated coordination in order to get many puzzle pieces to fit

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together perfectly. This is extremely hard to accomplish today. The second scenario is software that has extremely fast adoption. This is critical to capturing and taking over markets. Competition is for losers. That’s weird because we think of losers as people who are bad at competing. We say losers are the people who are really slow on the track team in high school or those that don’t get into great universities. Perhaps we should think of competition itself as fundamentally flawed. However, we see competition as a form a validation. We are imitative creatures who learn by modeling others’ behavior. This is an unhealthy practice in Startupland; consider the thousands of people who try to become famous athletes or actors and fail. You should be doing something truly unique, not something that everyone else is doing. We get so wrapped up in winning competitions that we lose sight of truly creating value. While competition makes you better at whatever it is you’re competing at, it seems foolish to run through a door that everyone is scrambling to get to. Instead, go around the corner and walk through the huge gate that no one is taking.

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Moskovitz, Dustin, et al. "How to Start A Startup." CS 183B.

Stanford University, Palo Alto. Lecture. Altman, Sam, et al. "Team and Execution." CS 183B. Stanford

University, Palo Alto. Lecture. Graham, Paul, et al. "Before the Startup." CS 183B. Stanford

University, Palo Alto. Lecture. Cheung, Adora, et al. "Building Product, Talking to Users, and

Growing." CS 183B. Stanford University, Palo Alto. Lecture.

Thiel, Peter, et al. "Competition is for Losers." CS 183B.

Stanford University, Palo Alto. Lecture. *This bibliography deviates from standard MLA format to put all of the citations in the order in which they appear instead of alphabetical order by last name. Additionally, the “et al” is included to cover any and all contributors for each lecture, including certified Genius commenters.

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There are a lot of people to thank for their help in

bringing this work to fruition. First and foremost, I need to thank the team at Trendify. Eamon Cagney, Will Madaus, and Justin Hegyi deserve huge thanks for their support of this work, as well as their dedication to Trendify’s mission. I especially need to thank Jay Bhandari and Jake Haberman for editing this over and over.

Next up is Pulak Mittal, formerly at YC, now at Clever. Pulak, thanks so much for your work with the course and for helping me edit the final draft of The First 30%. I appreciate you putting up with my incessant nagging emails.

Third on this list are all of the wonderful folks at YC, including Sam Altman and all of the partners and staff who make YC such an amazing place. You guys made something special with CS 183B and I’m proud to be able to share my version of your work with the world. Credit for good stuff goes to you, of course.

Fourth, the lecturers who made this course so amazing deserve not only my thanks, but the thanks of everyone who watched, listened to, or read notes from 183B. Please don’t sue me for repackaging and distributing your stories :-)

To my parents and little sister: I hope I’ve made you guys proud. Thanks for your undying faith in me and my endeavors. It means the world to me; I couldn’t do it without you.

To anyone that I’ve missed, know that you played an important part in this. The startup story is the story of everyone who has felt an urge to create. So, to all of the makers, dreamers, and doers, to the code monkeys, marketing mavens, and UX ninjas, let’s go build something together!